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DGI Adventure 03-11-17 – Weekend Expiry Discussion

Happy weekend everybody!

I mentioned a while back that I was going to take an “active indexing” approach for the funds in my traditional IRA account (#2 in the portfolio back at the mother ship). This involves cash secured puts and covered calls on a couple of indexes, namely SPY and VNQ.

I’m sitting at the big boys table when I play with SPY options contracts. It’s a pretty big position, but the payback is loads of liquidity at lots of different strikes and expiries.

It takes a little getting used to having that much money on the line.

In my last post, I kind of coolly glossed over the fact that I had sold an SPY MAR10’17 237.5 PUT.

For 8 days I had $23K on the line with only 0.32% of downside protection. It earned an 11%+ annualized return, but Mr. Market made it pretty interesting:

SPY 5 day chart – courtesy Yahoo Finance

That was fun!

Sure, it eeked out in the end, but I was ready to get assigned. For one thing, occasional assignment is a feature not a bug, but in this case it would have been especially attractive. Next Friday (3/17) is not only St. Patrick’s day, but alsoQuadruple Witching, which is when SPY goes ex-dividend, so I wouldn’t need to hold the shares very long to collect the divie.

We’ll see what happens next week, but I might get even more aggressive with the 3/15 expiries in order to get assigned before ex-div.

That’s the day of the FOMC meeting, so theoretically volatility could be a little more expensive?